Shell Oil Ready to Drill in Arctic Ocean to Recoup Its Years-Long Investment

By William McCall | May 7, 2010 | 8:48 AM EDT

Portland, Ore. (AP) - Shell Oil, ready to drill in the Arctic Ocean this summer, asked a federal appeals court Thursday to rule quickly on a challenge by environmentalists concerned about the risk of a major spill after the Gulf of Mexico disaster.

Kathleen Sullivan, an attorney for Shell, said the company has spent at least $3.5 billion on Alaska operations in the past few years as it prepares for exploratory drilling set for July in the Beaufort and Chukchi seas.

"Shell has waited years to recover its investment," Sullivan told a three-judge panel of the 9th U.S. Circuit Court of Appeals in Portland. "We're ready to go."

But a coalition of environmentalists and Native Alaska groups who are challenging the drilling plans told the court the federal Minerals Management Service failed to consider the potential threat to wildlife and the risk for disaster before it approved the Shell project.

Christopher Winter, an attorney for the Alaska Eskimo Whaling Commission, said the Interior Department agency "simply ignored key aspects" about the possible effects of drilling operations on bowhead whales, including interruption of feeding patterns.

David Shilton, a Justice Department lawyer representing the minerals service, responded by saying studies have shown noise from drilling has only a "temporary and minor" effect on the whales, whose population is healthy and has been increasing.

Deirdre McDonnell, the attorney for the Native Village of Point Hope in Alaska, the lead petitioners in the case, argued that Shell had not made adequate plans to deal with an emergency, such as a major spill.

The Shell plan, for example, "doesn't say what happens if the drill ship is disabled or has sunk," McDonnell told the judges.

She also said government did not consider the cumulative impact of drilling in the Arctic Ocean.

Sullivan argued, however, the government must consider the facts at hand rather than "speculative" future impact and Shell has made extensive plans that include dealing with "the remote and infinitesimal likelihood of a spill."

Interior Secretary Ken Salazar announced last December the Minerals Management Service had conditionally approved plans by Shell to drill three exploratory wells in the Chukchi Sea, saying environmentally responsible exploration is a key component of reducing dependence on foreign oil.

Conditional approval for exploration in the Beaufort Sea came last October, as part of the development of oil leases sold under the Bush administration and upheld by the Obama administration in March.

Although the appeals court hearing had been scheduled before the Gulf Oil spill and arguments did not involve it, the environmental coalition has been making comparisons in public statements about the case.

Caroline Cannon, president of the Native Village of Point Hope, which claims to be the oldest continuously inhabited community in North America, said "our hearts go out to the residents of the Gulf of Mexico -- the spill there threatens to devastate their lives."

Cannon said a spill in the remote Arctic Ocean would be even more difficult to clean up and would threaten "our thousand-year-old subsistence traditions."

On Monday, conservation groups and other organizations delivered a letter to the U.S. Senate opposing expanded offshore oil and gas exploration, citing the BP Deepwater Horizon spill in the Gulf of Mexico.

On Wednesday, environmental groups sent a letter to Salazar urging him to reconsider the exploratory Alaska drilling by Shell.

It noted that minerals service had acknowledged an Arctic Ocean spill could have devastating effects and be difficult to clean up but concluded a large spill was "too remote and speculative an event" to warrant analysis.

The environmental groups said the Coast Guard commandant, Admiral Thad Allen, who is overseeing response efforts in the Gulf, told a recent Senate field hearing in Alaska that oil spill cleanup is "significantly more difficult" in colder temperatures and the region has "limited response resources and capabilities."

Shell Oil, ready to drill in the Arctic Ocean this summer, asked a federal appeals court Thursday to rule quickly on a challenge by environmentalists concerned about the risk of a major spill after the Gulf of Mexico disaster.&nbsp;